The first point of action for Spotify is addressing its non-existent margin: streaming is a technology, not a business, and as such no business plan should solely revolve around said technology itself just because people care about music doesn’t make it profitable.
Yes, Spotify’s numbers are impressive, but a strategy that assumes revenues but not expenses rarely makes sense. At this pace, the company is losing $2 per user per year, and its average revenue per account is declining fast. And therein lies the issue: 1 fan who listens to 1 song 10,000 times is only 1 subscriber, giving Spotify a mere $9.99 of revenues per month, yet the company has to pay the recording artist about $44. That’s because a very high percentage of its revenues are paid back to the artists, meaning the company has always operated at a loss as it concentrates on break-neck growth. Yet, Spotify still can’t make a profit, in part due to absolutely razor-thin margins (ie: non-existent). Such growth is, to me, indistinguishable from magic. With 170M users, 75M of whom are premium subscribers (36% of premium music subscribers globally), the company made $5bn revenues in 2017, compare to $2bn in 2015. It would be easy to argue that Spotify is on its way to industry hegemony. A non-musical lesson for a musical strategy
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